Other inventory-led etailers are burning billions; we have no such issue: Snapdeal's Bahl

Snapdeal is eyeing a five-fold increase in the value of goods sold through its platform to $9-10 billion by December this year. Though it is piling losses now, the e-tailer says when it does turn the corner, it will be the most profitable e-commerce company in India. In an interview to Firstpost_’s_ Sindhu Bhattacharya, co-founder and CEO Kunal Bahl likens Snapdeal’s trajectory to that of the Chinese e-commerce giant Alibaba which became profitable only after 11 years. For now, the company is focused on getting a million sellers on its platform in the next three years from just a lakh at present. Apart from getting more small sellers to come to it, Snapdeal is also simultaneously expanding its tech prowess and growing through strategic acquisitions. It recently acquired Exclusively.in, a luxury and fashion portal as it looks to scale up the fashion business to $2 billion in GMV by December. Excerpts: Reports suggest Snapdeal is going from $2 billion to $10 billion in gross merchandise value (GMV) by December. How are you going to achieve five-fold growth in such a short span? What all categories will be the growth drivers and what all will Snapdeal be doing differently compared to previous years to achieve this kind of growth? The company has grown 600% in the last 12 months. We will continue to work towards not just maintaining but bettering the growth momentum this year. Fashion, Electronics and Home categories will be the largest contributors to this growth. With the exponential growth in the base of sellers on Snapdeal, we are witnessing significant acceleration of network effects in our marketplace, which is further propelling our growth rates into higher orbits. Flipkart has made ‘Big Billion Day’ its annual property with some success. Is Snapdeal looking to create any periodic discount days with mega branding? Can consumers expect bumper discounts around Holi, for example? [caption id=“attachment_2116415” align=“alignleft” width=“380”]  By March 2015 end, Snapdeal will have 1,500 engineers, said co-founder and CEO Kunal Bahl[/caption] Our aim is to create life changing experiences for our buyers and sellers. For our buyers, we endeavour to offer them the widest range of products at best prices every single day. Being a marketplace, all pricing decisions lie with our sellers who participate with us on all our sale campaigns. Along with our sellers, we do plan for mega sale events from time to time and Holi is one such occasion. Deep discounting by etailers is welcomed by customers but frowned upon by regulatory authorities. Your thoughts on how should regulation work for this sector and whether the government is going overboard with framing regulations for e-commerce companies. What are the industry’s expectations from the Budget? Online marketplaces play a vital role in connecting sellers, small businesses and retailers with customers across the country. This essentially serves two purposes: it provides a platform for small, medium businesses and sellers to grow their business in a very cost efficient manner and it provides access to products of choice to customers. While in metros e-commerce is more about convenience and a nice option, for tier 2 and tier 3 cities it is a necessity. With online marketplaces, customers in these markets can buy essential products (like glucometers/BP monitors etc) from their homes and not rely on visits to larger cities or relatives visiting from metro cities. On the whole, online markets have a positive impact on the growth of our economy and the lives of people. The government plays an important in making the environment more conducive for the growth of small and medium business. A clear guideline on taxes like GST will go a long way in helping the industry grow. Snapdeal has been talking of engagement with sellers at every level, getting more and more small guys on to its platform. Some thoughts on how much of this has been achieved; how many small sellers currently do business on the site and how this network will be expanded going forward. We currently have 100,000 sellers on board which primarily comprise small and medium sized businesses, brands and local merchants. By the end of this year, we will have 250,000 sellers on our platform. Our target is to create one million successful entrepreneurs in India within the next three years. This year we expect more than 5,000 of our sellers to clock over Rs 1 crore in sales through our platform, which will be an increase of five times over the last year. Over 30 percent of our sellers are women, many are first time entrepreneurs and we want to take this number to 50%. Rivals are already speaking of real time deliveries. Is Snapdeal also looking at something like this? What all are you doing to improve the back end and logistics of the e-commerce business? Eighty-five percent all orders placed on Snapdeal are shipped within 24 hours. That said, we are constantly working towards further improving the back-end and logistics part of the business. For instance, we have recently introduced tamper-proof packaging with special hologram features in order to ensure that customers receive the product they ordered for in the optimum condition. We have a strong pipeline of initiatives that we are taking to ensure smooth and faster deliveries in the future as well. We cover over 5,000 cities and towns across the country this includes all PIN codes in Andaman and Nicobar Islands, over 1,100 PIN codes in north eastern states, almost all of Jammu & Kashmir (including Leh and Ladakh). Online marketplaces like ours provide access to products in areas where they may not be readily available in the offline markets. While same day delivery is a good to have service, it has been observed that customers, especially those outside of the top 10 cities, are more concerned about certainty of availability of products at best prices. Why acquire a luxury business, specially since you have been focused on engaging with small entrepreneurs all along. Will acquisitions form a key part of the growth strategy from here on? Is there a war chest you have created for acquisitions already? While we continue to focus our energy on the Snapdeal platform towards creating life changing experiences for small businesses, we have to be mindful of what our consumers are describing as their needs. Luxury products and services is a $14 billion market in India and growing at 30% year on year, according to a recent KPMG-ASSOCHAM report. More than 70% consumers want to shop for luxury products in India rather than abroad. With Exclusively, we aim to create India’s largest online luxury mall to offer consumers across the country this selection of luxury and premium products and services. Our target is to have $1 billion GMV for Exclusively over the next three years. We plan to be very acquisitive this year, focusing very thoughtfully on key areas that enable us to build the best ecosystem for buyers and sellers across the country. The key is to building a strong brain trust of entrepreneurs in our company who will work together to build this market-winning digital commerce ecosystem in India. Also, fashion seems to be a big business driver but unlike some rivals you do not have a separate business portal. How big is fashion for you and what is the strategy to grow this vertical going forward? What are the top five verticals right now, sales volume wise? Fashion is the fastest growing category on Snapdeal. Currently, the fashion business contributes to over 60% of the volume of orders at Snapdeal. Our fashion business grew 10 times in the last year and while our focus was initially in the tier 2 markets for fashion categories, you will see us being very focused on driving traction for fashion in urban locations as well this year. We are looking at reaching $2 billion in GMV in fashion this year. With Exclusively in our portfolio, we are confident that we will change how consumers shop for luxury in India by building India’s first online luxury mall. Your focus on tech: how many engineers/other tech personnel being hired, how much of the business is on mobile and will any acquisitions be made to enhance tech prowess of the company? Technology continues to remain one of our primary focus areas as Snapdeal is ultimately a technology platform company and not an inventory-led retail business with a website. By the end of this fiscal year, the engineering team at Snapdeal will be 1,500-people strong. We have set up a technology and innovation centre in Bangalore. At this centre, we have set up a research facility which is working on developing cutting edge technology for enhanced customer experience. We will invest $100 million over the next three years in this technology centre. Mobile is a big focus and we have grown really fast in this medium. Currently 70 percent of the orders on Snapdeal come via mobile-based transactions, up from a mere 5 percent 18 months ago. As far as acquisitions are concerned, we will make the necessary investments where ever we see that an inorganic move, as this will help us further strengthen the Snapdeal platform in terms of technology. Wishpicker was one such recent acquisition which has worked out extremely well for us within a short period of time. A news report has spoken of a five-fold increase in losses this fiscal. Correct? Are you targeting profitability anytime soon or do you think that building scale is more important right now than targeting profits? Our focus is to build a large successful enterprise and we have a long-term horizon to achieve the same. Snapdeal has seen phenomenal growth over the last two years and the company is in a phase of hyper-growth currently and we will continue to work towards bettering our momentum. We have a long-term view for our business, this is a phase of investment for us. 1) We have invested in six acquisitions so far and will continue to look for strategic inorganic growth opportunities; 2) we are strengthening our technology platform. We have doubled our engineering team and have hired some of the best talents available globally; 3) we have also set up a technology and innovation centre in Bangalore. These are essential investments to lay the foundation for building a world class technology company that wants to enable over a million businesses to successfully leverage e-commerce. That said, we are the most capital efficient e-commerce company in the country and invested less than $200 million since we started the business to get to the scale we are at currently. I am confident this is a fraction of what other inventory led e-commerce players in our industry would have invested to get to a similar or small scale. Alibaba turned profitable in the 11th year after its inception and now generates over $5 billion in EBITDA. Given our business model is similar to Alibaba and has the same operating leverage as their business, we believe once our investments in technology and logistics infrastructure reach a satisfactory equilibrium, we should become the most profitable e-commerce company in India. Rivals are again in the market to raise mega funds. How about Snapdeal, do you need funds anytime soon? How much and by when? We have seen huge interest from the investor community given our scalable and capital efficient business model along with the demonstrated results. Currently we are extremely well capitalised and don’t need to raise capital unless it is for a strategic purpose. Other inventory-led e-commerce companies in India are burning billions of dollars and hence probably need to go out in the market regularly to raise significant capital to keep the lights on. We have no such issue in our business.